​Can trade be the game changer in Indo-Pak relations?

Jhinuk Chowdhury is a former journalist based in India and is currently working as an independent writer. She has worked as a business correspondent for the leading Indian daily – The Times of India – covering human resources, IT, jobs and careers.
You can follow her on Twitter @jhinuk28.

The SAARC aspiration for greater economic cooperation has been suffering serious jolts due to the bilateral rivalry between two of its largest nations – India and Pakistan.

Therefore Prime Minister Narendra Modi’s invitation to Nawaz
Sharif to his inauguration ceremony, and his acceptance, along
with other SAARC leaders coming can be seen as a welcoming
gesture for a possible step towards stability in the region.

Many believe the pro-business approach of both Modi and Sharif
can make a France-Germany or Brazil-Argentina – each of which
share significant trade relations despite a past of political
hostilities – possibly by keeping economic ties independent of
‘other’ issues.

As former President of the Karachi Chamber of Commerce and
Industry in Pakistan, Majyd Aziz, who has been very emphatic of
his views on liberalization of trade and investment within SAARC
and primarily between Pakistan and India, says, “I have been
very vocal when it comes to trade and investment between both the
neighbors. Yes, I do agree that the process is not easy. My
assertion has always been that trade and investment should never
remain a hostage to other contentious issues or even the usual
accusations that emanate out of the hallowed halls of officialdom
in New Delhi and Islamabad.”

He adds, “Examples galore among countries where trade and
investment have been shielded from getting overpowered by
troublesome issues that are the domain of diplomats, military or
bureaucracy. China-India, China-Taiwan, China-Japan, China-USA,
France-Germany, just to name a few.”

In fact China-India trade is expected to reach $100 billion by
2015, despite both countries being archrivals.

Most certainly then Indo-Pak trade which today stands at a mere
$3 billion with a possibility of reaching $40 billion is a huge
potential that needs to be exploited.

Modi is riding the wave of his success on promises of economic
development. For him to come across as a leader committed to
greater investment, infrastructure and job creation, Modi needs
to have a secure and peaceful region apart from using foreign
relations to create more businesses at home. His invitation to
SAARC members is probably a sign of his intent to have long term
economic alliances in the region.

Sharif seems to share the same sense of economic diplomacy. He is
seen as a leader keen on eliminating roadblocks towards trade
liberalization and creating friendlier environment for
investment.

In fact a few days after the Modi-Sharif meeting, Pakistan’s
Commerce Minister Khurram Dastgir Khan told the media that India would be granted
Non-Discriminatory Market Access (NDMA earlier Most favoured
Nation – MFN) status despite issues like Kashmir, Siachen,
Afghanistan and Sir Creek.

Pakistani diplomats have reportedly been involved in "back channel diplomacy"
with the now ruling Bharatiya Janata Party (BJP) conveying
Islamabad’s willingness for "meaningful engagement".

Will trade and investment then be the necessary game changer to
bring about the long awaited and often thwarted peace between
India and Pakistan?

“Yes”, says Aziz who feels a receptive Indian market for
Pakistani products would be the ideal confidence-building
measure. ”The advent of a Corporate Prime Minister in New
Delhi and the business-oriented thinking of Nawaz Sharif coupled
with their commonalities have enforced the hopes and aspirations
of the Pakistani businessmen who see a new paradigm in the
bilateral relations and, by extension, in the SAARC intra-trade
and investment scenario.”

To echo Aziz’s spirit indeed there are ample business
opportunities between the two nations ranging from joint
ventures, outsourcing, technology transfers, Indian Special
Economic Zones in Pakistan near the border, opening up of the
Munabao-Khokhrapar route for trade, and people-to-people
movement, a facilitative visa regime, mutual recognition of
standards, harmonization of customs regulations and procedures,
to an alternate dispute resolution mechanism, and cross-border
banking facilities.

Backed by a strong mandate both the leaders seem to be better
positioned to make decisions. The strong majority of the Modi
government will make policy making and implementation much easier
and faster. Similarly the Sharif government also took charge last
year in May with a huge majority on its pro-growth agenda.

However, while they both have a majority in their elected
governments, the context in both countries are different cautions
Michael Kugelman, Senior Program Associate for South and
Southeast Asia, at the Woodrow Wilson International Center.
“Even though Pakistan’s government was elected on a strong
mandate, it is difficult for it to act with carte blanche given
the power of the military. By contrast, India’s new government
will truly be unencumbered, because there is no larger
institutional player behind the scenes that can constrain—or
attempt to constrain—its actions and policies.”

Nationalism over economic pragmatism

Kugelman suggests the recent developments be taken with a
‘generous dose of pragmatism’. While Modi’s initial focus will be
on economic diplomacy with Pakistan, he feels this will continue
only as long as there is no provocation such as a terrorist
attack in India traced back to Pakistan.

“And once this provocation occurs, all bets are off and we
can expect Modi will revert to his more hardline,
security-focused side. After all, while Modi is an economic
pragmatist, he is above all a nationalist. And as a nationalist,
he will not let his country stand idly by if it is provoked by
its long-time nemesis.”

Modi is likely to resort to a muscular foreign policy on the occasion of any border
incident. His party has also been very vocal in criticizing
inaction from the former government towards an alleged beheading of Indian soldiers by Pakistani
troops last year.

Even during the bilateral meeting after his swearing in, Mr Modi
asserted that Pakistan brings those accused of 26/11 attacks and other terrorism in India to task. Even
if the Modi government wants to forward an economic diplomacy
independent of issues around security pressure will mount from
various factions in India to take tough actions.

As Sameer Patil, Associate National Security Fellow at Gateway
House, says, “For India, Pakistan’s cooperation in curbing
anti-India terrorist activities and the trial of the 26/11
accused are both pre-conditions for any substantive talks.”

“The peace process cannot make any progress if Pakistan
allows terrorist groups like Lashkar-e-Tayyaba, Jaish-e-Mohammed
and Hizbul Mujahideen to continue their anti-India activities. In
such a scenario, there would be immense pressure on the Indian
government, from the general population and the security
establishment, to not to engage with Pakistan,” Patil
continues.

Being part of a right-wing nationalist party, Modi will face
pressure from within to make peace and security issues are a
prerequisite for any further talks including economic
cooperation. Then there are diplomatic factions who have for the
past two years rejected bilateral dialogues until the 26/11
attackers are brought to book.

Rajiv Nayan, Senior Research Associate, Institute for Defence
Studies &Analysis (IDSA - India), agrees that “even if
Modi takes any bold posture, he cannot ignore terror-related
cases. In an established democracy like India, where public
opinion matters, Modi will not afford to ignore public sentiments
regarding its security.”

The hardliners

In Pakistan, despite positive sentiments demonstrated by its
political and diplomatic factions over Modi’s election, Sharif
faces opposition from hardliners comprising the country’s
military establishments and anti-India factions like
Jamaat-e-Islami and Lashkar-e-Tayyeba who vociferously opposed
Nawaz Sharif’s visit to India.

Though it did not spell out its resistance, according to media
reports the recent developments did not go down too well with the
Pakistani Army. Many fear this might further widen the rift
between Nawaz Sharif and the Army – a relationship already at a
standoff over the country’s Geo TV Network's allegation that the
Army’s intelligence wing ISI was behind the recent attack on its
anchor Hamid Mir. Sharif, who shares good relations with the
media group, decided to support Geo TV which has irked the Army.
Added to that, there is a bigger difference between the two over
possible dialogues with the insurgent Tehreek e Taliban.

As Pakistan based journalist, CT Adviser and an entrepreneur, Ali
:* Chishti, says, “Overall feel in Pakistan is negative since
there's tension between Military and PML-N government and overall
opinion about the situation had been that PML-N is pro-India and
has chosen the wrong time to meet Modi.”

Pakistan has always had a faction of the Pakistani security
establishment who simply do not want to reconcile with India,
says Kugelman. “And in fact, the military as an institution
has long justified its powerful role in politics on its
contention that India is an existential threat. If there is a
peace accord with India, then it would be hard to argue that
India continues to be a threat—and it would then also be hard for
Pakistan’s military to continue to justify its outsize role in
political affairs.”

“As with many other aspects of India-Pakistan relations,
Pakistan’s government may be more willing to give more than the
Pakistani military is willing to sanction,” he argues.
“Many of those responsible for the Mumbai attacks are members
of anti-India militant groups with longstanding ties to
Pakistan’s ISI. Pakistan’s military won’t be as eager to give up
its assets as Pakistan’s government—and India’s government—would
like.”

Trust deficit

The trust deficit between the two nations continues to prevent
any major breakthrough. While India feels the Pakistani military
and Inter-Services Intelligence (ISI) is fuelling cross border
terrorism, Pakistan accuses India of supporting insurgents in
Balochistan.

Says Ismail Dilawar, Acting Bureau Chief, Pakistan Today,
“The nature of conflict between the two countries is that of
perception in nature and so the trust deficit on two sides goes
quite deep. Pakistan like India is coping with the non-state
actors militarily as well as judicially. The Mumbai attack and
26/11 are the incidents that happen to seriously challenge the
leadership in Islamabad and New Delhi. Both will have to adopt a
forward looking approach in the broader interest of their
crises-hit peoples.”

Added that there’s a general mistrust in Pakistan about Narendra
Modi’s taking charge, who is seen as an ultra-conservative Hindu
leader emerging from the RSS. With this in the background long
term relations – economic or otherwise – is always a hostage to
activities of anti factions.

As Kugelman sums it up, “This is the tragedy of
India-Pakistan relations. Regardless of how much progress is
made, and regardless of the various diplomatic efforts to inject
momentum into a peace process, all it takes is one big terror
attack in India, traced back to Pakistan that can squander all of
the goodwill. The key is for the two sides to generate sufficient
goodwill and trust, so that the bilateral relationship can
weather and survive a traumatic act such as a Pakistani-hatched
terror attack on Indian soil. “

Jhinuk
Cchowdhury

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.